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At present’s market turmoil has hit most FTSE 100 shares, together with one famend dividend payer with long-standing defensive qualities. But it nonetheless ranks among the many steadier names on the index and the valuation appears cheap to me. Is that this an excellent alternative to purchase it at a slight low cost?
The corporate in query is British American Tobacco (LSE: BATS), which boasts one of many strongest dividend data on your entire blue-chip index. The group has elevated shareholder payouts yearly because the begin of the millennium, except for a technical blip in 2017 when a change in fee frequency interrupted the expansion document.
British American Tobacco shares dip
Smoking charges have dropped sharply throughout Western markets due to well-known well being dangers. British American Tobacco has managed to resist that decline by positioning itself as a formidable revenue engine.
At present the shares provide a trailing dividend yield of 5.6%. Forecasts recommend that might rise to five.87% in 2026 and 6.07% in 2027. That highlights the attraction of prime dividend revenue shares. They don’t simply provide beneficiant yields however sometimes intention to raise shareholder payouts steadily over time, probably giving traders a excessive and rising revenue.
The tempo of progress has slowed although. Over the past 15 years, shareholder payouts have grown at a compound annual charge of 4.5%. Over the previous three years that determine has slipped to about 2%. Given the comparatively excessive beginning yield, that received’t fear traders an excessive amount of.
Inventory resilience
In addition to revenue, British American Tobacco has delivered loads of share worth progress. The shares have climbed 86% during the last two years and round 38% over 12 months. Dividends are on prime.
It’s slipped about 7.7% previously turbulent week although, roughly according to the broader market sell-off. I believed it might need held extra regular than that, on condition that world battle appears unlikely to have a direct affect on cigarette demand.
Traders have additionally been digesting 2025 full-year outcomes launched on 12 February, with income edging down 1% to £25.6bn. On a relentless foreign money foundation it truly rose 2.1%.
The corporate’s newer product traces proceed to increase at a sooner tempo. Income from these classes climbed 7% to £3.62bn and their contribution to revenue jumped 77% to £442m. Money technology stays sturdy and the board confirmed a £1.3bn share buyback for 2026.
Lengthy-term outlook
There are nonetheless long-term dangers. International smoking charges proceed to fall and regulation is tightening, notably round vaping merchandise and associated options. After such a powerful share worth run, some cooling wouldn’t be shocking both. Continued market volatility might additionally inflict extra short-term injury.
Large Tobacco isn’t for everyone, but it surely has an extended historical past of rewarding affected person shareholders. Development could sluggish from right here, however the current pullback barely reduces the valuation danger. British American Tobacco is price contemplating in at present’s uncertainty. The FTSE 100 at the moment presents loads of battered names, so alternatives are popping up throughout the index. I don’t purchase tobacco shares myself, so I’ll be focusing on one or two of these as a substitute.
